Income Protection Insurance for Contractors

Income Protection Insurance for Contractors: Securing Your Finances

As a contractor, you’re not entitled to the conventional sick pay provided in regular employment. This can pose significant challenges if you’re unable to work due to an accident, illness, or injury.

Income protection insurance allows you, as a contractor, to effectively secure your own “sick pay.” Let’s delve into why income protection has become an essential insurance for self-employed individuals..

How Does Income Protection Insurance Work?

Income protection is a personal protection plan designed to provide a percentage of your income if you’re unable to work due to ill health. The maximum amount you can claim depends on the insurer you choose. An advisor can help you navigate the market and find a provider that meets your income requirements.

Once you’ve determined the monthly benefit amount, you’ll need to decide on the coverage duration. Unlike some accident and sickness policies that require annual renewal with a new quote, income protection policies provide coverage for a fixed number of years, similar to a life insurance policy.

For example:

Let’s consider John, a 45-year-old foreman who takes out an income protection policy with a monthly benefit of £1,000 to cover himself until the age of 65. After five years, John sustains a back injury that permanently prevents him from returning to work as a foreman.

After the deferment period has passed, John will begin receiving £1,000 per month, every month, until his 65th birthday.

What is a Deferment Period?

The deferment period refers to the duration you must be signed off work before the insurance company starts paying out your monthly benefit.

Choosing a longer deferment period leads to lower monthly premiums. This option is suitable for those who have sufficient savings to support themselves financially for a few weeks or months before making a claim, or for individuals seeking reduced monthly premiums.

However, if you require the benefit to commence immediately without an income, this option is also available to address immediate financial obligations.

How Can I Apply for Income Protection Insurance?

Applying for contractor income protection insurance is straightforward. Once you’ve determined the desired monthly benefit, term, and deferment period, you’ll need to provide additional information to the insurer for assessment. Factors such as your job title, income, and any previous health conditions are typically taken into account before final terms are offered.

In most cases, you’ll be accepted on “standard terms” and can start your policy right away. Occasionally, a rating or exclusion may be placed on the policy to ensure you can access the full benefits of income protection while accounting for certain pre-existing conditions.

For more information on income protection for contractors or to receive a personalized quotation, contact us today, and a member of our team will be delighted to assist you at 0203 827 8560.